IT & ENTERPRISE - NEWS & ANALYSIS /

BENGALURU: One97 Communications, which runs mobile payment and ecommerce platform Paytm, is in advanced talks to raise fresh funding of about Rs 2,000 crore ($300 million) from Taiwanese semiconductor maker MediaTek, Goldman Sachs, Singapore’s Temasek and other investors, according to two persons with knowledge of the development. This round will see Paytm’s valuation more than doubling to $5 billion.
Existing investors, which include Chinese Internet giant Alibaba and its payments affiliate Alipay besides venture capital firm SAIF Partners, will also be participating.

“The new round is expected to value the company at close to $5 billion,” said one of the people cited above. The money will be deployed across all of Paytm’s businesses — digital payments, online marketplace and the upcoming payments bank, the person said.
Paytm was valued at $2.3 billion in the last round of capital infusion in June.
Paytm E-commerce Pvt Ltd, set up earlier this month, will house the marketplace and is expected to initially mirror parent One97′s shareholding.

This unit is also expected to become the launchpad for Alibaba’s online operations. The Chinese company’s business-to-consumer site Tmall is expected to make its India debut in six months.

Founder Vijay Shekhar Sharma, who holds the payments bank licence in his personal capacity, has established Paytm Payment Bank to house the financial services business.
The arm’s CEO Shinjini Kumar and Ash Lilani, whose investment firm Saama Capital is an early Paytm backer, are on the board of this entity. The bank is likely to be launched in October.

ET was the first to report on Paytm’s plans to spin off its ecommerce business and raise fresh capital in its March 21 edition.

The new round of financing comes after Alibaba and Alipay invested a total Rs 4,400 crore in 2015, according to Registrar of Companies (RoC) filings. Paytm has said it raised about $675 million from Alibaba and Alipay.

ET could not ascertain the cash split between the payments bank and commerce business. Paytm did not reply to a detailed email questionnaire sent by ET and multiple calls made to its spokesperson. There was no response to emails sent to MediaTek, Goldman Sachs and Temasek.

Largest round this year
If the deal goes through, it will be the largest financing round in India’s broader technology and internet space this year, going past the $200 million raised by online marketplace Snapdeal and $150 million by grocery retailer Bigbasket.

But in the last 10 months, investor sentiment on the broader tech and internet ecosystem has turned cautious.

Snapdeal and Flipkart have found it hard to raise capital at their existing valuation, according to multiple sources directly involved in these talks, with the latter also seeing a series of valuation markdowns by mutual fund investors.

What helps Paytm in raising capital is that it has established market leadership in consumer payments, while ecommerce companies like Flipkart are under constant threat from US rival Amazon, according to analysts.

“In the payments space, they (Paytm) have a big lead and an edge in terms of execution on the ground,” said Forrester Research analyst Satish Meena. “They are tapping the next 100 million customers, while other mobile wallets are pushing their services to the same top 50 million customers by offering cashbacks.”

Rivals’ plans
Paytm rivals in payments include Mobikwik, which recently raised $40 million from South Africa’s Net1, and Snapdeal-owned Freecharge, which has been looking to raise a $150-300 million round since October 2015. Flipkart is also expected to launch its mobile payments business under PhonePe next week, and plans to invest $100 million initially.